Job shops are small manufacturing operations that handle specialized manufacturing 1

processes. 

1

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

ACR MACHINE, INC., :

Plaintiff, : CIVIL ACTION

 :

v. :

 :

THE HARFORD MUTUAL :

INSURANCE COMPANY : NO. 05-CV-04776

Defendant. : 

MEMORANDUM

LEGROME D. DAVIS, J. May 31, 2006

Presently before this Court is Defendant’s Motion for Summary Judgment (Doc. No. 9,

10) and Plaintiff’s Response thereto (Doc. No. 11-13). For the reasons set forth below,

Defendant’s Motion for Summary Judgment is denied. 

I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

On August 12, 2005, ACR Machine, Inc. (“ACR”) filed a complaint in the Delaware

County Court of Common Pleas against Harford Mutual Insurance Company (“Harford”),

alleging that Harford breached its insurance contract with plaintiff when it refused to reimburse

plaintiff for the loss of sixty-one (61) mechanical housings. On September 6, 2005, Harford

removed this matter to the United States District Court for the Eastern District of Pennsylvania

based on diversity jurisdiction. 

ACR is a corporation operating a job shop that primarily machines metal. Def’s 1

Case 2:05-cv-04776-LDD Document 15 Filed 05/31/06 Page 1 of 10
 The mechanical housings are also called “castings.” A mechanical housing is 15 inches 2

in diameter and weighs approximately 40 pounds. Def’s Memo., Ex. J at 3. 

 According to Sermatech’s records, 81 of the mechanical housings were coated and 3

diffused and 16 were not. Def’s Facts ¶ 17. ACR paid Sermatech $19,185 for its services. Id. 

2

Statement of Undisputed Facts (“Def’s Facts”) ¶ 6. Andrew C. Ruszkay, Jr. is the sole

shareholder and serves as ACR’s President. Id. Andrew C. Ruszkay, Jr.’s father, Andrew

Ruszkay, Sr., is employed by ACR, Darlene Schroder is ACR’s administrative assistant, and

Edward Follett is ACR’s government contract administrator. Id. ¶¶ 6, 39. 

On December 13, 2002, ACR entered into a contract with the United States Government,

Department of Army, Tank Automotive Command (“TACOM”). Id. ¶ 8. The contract required

ACR to provide TACOM with 98 machined mechanical housings, which were to be delivered in

installments between March 5, 2004 and August 13, 2004. Id. After purchasing the mechanical 2

housings from a company called Gray-Syracuse, ACR had them sent directly to Sermatech, a

company that had agreed to coat the mechanical housings. Id. ¶¶ 9-10, 13. Gray-Syracuse’s

records confirm that 98 mechanical housings were sent to Sermatech for ACR during the period

between September 9, 2003 and August 6, 2004. Id. ¶ 12. Andrew Ruszkay, Sr. picked up the

mechanical housings coated by Sermatech and transported them to ACR in his truck on a number

of occasions. Id. ¶ 14. Sermatech identified 97 mechanical housings on its invoices and packing

slips for customer pickup by ACR. Id. ¶ 15. 3

On August 13, 2004, TACOM terminated its contract with ACR for failure to deliver the

supplies within the time required by the contract. Id. ¶ 22. ACR never delivered any mechanical

housings to TACOM and did not perform any work on the mechanical housings after TACOM

terminated the contract. Id. ¶¶ 24, 25. In August or September of 2004, ACR stored all of the

Case 2:05-cv-04776-LDD Document 15 Filed 05/31/06 Page 2 of 10
 The parties agree that 39 mechanical housings remained; however, there is some dispute 4

over whether there were 97 or 98 (or even 100) mechanical housings in ACR’s possession

initially. Since the records from Sermatech indicate that 97 mechanical housings were picked up

3

mechanical housings in its possession at its machine shop, located at the intersection of Tenth

Avenue and Chestnut Street in Coatesville, Pennsylvania. Id. ¶ 26. ACR did not count the

number of mechanical housings on its property between August 13, 2004 and March 30, 2005.

Id. ¶ 28.

In a letter to Barnes Aerospace (“Barnes”) dated March 24, 2005, Mr. Follett stated that

ACR had mechanical housings in stock that it was willing to sell to Barnes Aerospace. Id. ¶ 29. 

On March 30, 2005, Barnes called ACR to inquire about purchasing the mechanical housings. Id.

¶ 30. Barnes wanted to know how many mechanical housings ACR had, including the number of

mechanical housings that had undergone any machining process. Id. 

As a result of the call from Barnes, Andrew Ruszkay, Sr. went to the location where the

mechanical housings were stored. Pl’s Resp. to Def’s Facts (“Pl’s Facts”) ¶ 31. Some of the

mechanical housings were outside of their boxes, and Andrew Ruszkay, Sr. placed them back

into boxes. Def’s Facts ¶ 32. At some point, Andrew Ruszkay, Sr. realized that some of the

mechanical housings were missing. Pl’s Facts ¶ 34. He immediately informed his son, Andrew

C. Ruszkay, Jr., who looked around the shop and questioned Ms. Schroder and Mr. Follett to see

if the items had been moved. Def’s Facts ¶ 35; Andrew C. Ruszkay Depo. at 48-49. ACR

reported the missing mechanical housings to the Coatesville Police Department that day, March

30, 2005. Def’s Facts ¶ 42.

Approximately 58 of the 97 mechanical housings disappeared sometime between August

13, 2004 and March 30, 2005. See id. ¶ 41; Def’s Mot. for Summ. J. ¶ 15. According to Andrew 4

Case 2:05-cv-04776-LDD Document 15 Filed 05/31/06 Page 3 of 10
by ACR and since plaintiff “admitted” that it discovered the loss of approximately 58 of the 97

mechanical housings, this Court will assume, for purposes of this motion, that ACR originally

had 97 mechanical housings. See Pl’s Resp. to Def’s Mot. for Summ. J. ¶ 15.

 The police investigation was limited. See Def’s Facts ¶¶ 43-45. 5

4

C. Ruszkay, Jr., Andrew Ruszkay, Sr., Ms. Schroder and Mr. Follett, there were no break-ins,

forced entries, or employee thefts at ACR within the five years preceding December 1, 2005.

Def’s Facts ¶ 39. The police investigation revealed no signs of forced entry at ACR and no

evidence of ACR employee theft. Id. ¶ 45. 5

 Plaintiff ACR claims that it is entitled to insurance benefits for the loss of the mechanical

housings pursuant to insurance policy No. 9040320 (“Policy”) issued by Defendant Harford. See

id. ¶ 2. The Policy is for the period from December 31, 2004 to December 31, 2005. Id. 

Defendant Harford claims that a limitation in the Policy applies and, therefore, plaintiff’s loss is

not covered under the Policy.

II. LEGAL STANDARD

In considering a motion for summary judgment, the court must determine whether “the

pleadings, depositions, answers to interrogatories, and admissions on file, together with the

affidavits, if any, show that there is no genuine issue of material fact and that the moving party is

entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c); Anderson v. Liberty Lobby, Inc.,

477 U.S. 242, 247 (1986); Arnold Pontiac-GMC, Inc. v. General Motors Corp., 786 F.2d 564,

568 (3d Cir. 1986). All reasonable inferences from the record are drawn in favor of the nonmovant. See Anderson, 477 U.S. at 255; J.F. Feeser, Inc. v. Serv-A-Portion, Inc., 909 F.2d 1524,

1531 (3d Cir. 1990), cert. denied, 499 U.S. 921 (1991). 

III. DISCUSSION

Case 2:05-cv-04776-LDD Document 15 Filed 05/31/06 Page 4 of 10
5

Under Pennsylvania law, a court, rather than a jury, generally interprets the language of

an insurance contract. 12th Street Gym v. General Star Indem. Co., 93 F.3d 1158, 1165 (3d Cir.

1996) (citing Standard Venetian Blind Co. v. American Empire Ins. Co., 469 A.2d 563, 566 (Pa.

1983)). Where the language of the contract is clear and unambiguous, it must be given its plain

and ordinary meaning. Id. (citing Pennsylvania Mfr. Ass’n Ins. Co. v. Aetna Casualty & Surety

Ins. Co., 233 A.2d 548, 551 (Pa. 1967)). The burden of establishing coverage under an insurance

contract lies with the insured, while the burden of establishing a policy exclusion, which

precludes coverage, rests with the insurer. Erie Ins. Exchange v. Transamerica Ins. Co., 533

A.2d 1363, 1366 (Pa. 1987).

The Policy provides coverage for, inter alia, “direct physical loss of or damage to

Covered Property at the premises described in the Declarations caused by or resulting from any

Covered Cause of Loss.” See Policy, Building and Personal Property Coverage Form at 1. 

“Covered Property” includes “stock,” which is defined as “merchandise held in storage or for

sale, raw materials and in-process or finished goods, including supplies used in their packing or

shipping.” Id. at 1, 14. “Covered Cause of Loss” means “risks of direct physical loss,” unless the

loss is excluded or otherwise limited by the terms of the policy. See Policy, Causes of Loss -

Special Form at 1. One such limitation is implicated in this case. The Policy provides that there

is no coverage for loss or damage to “[p]roperty that is missing, where the only evidence of the

loss or damage is a shortage disclosed on taking inventory, or other instances where there is no

physical evidence to show what happened to the property.” Id. at 5. 

Defendant argues that plaintiff’s loss is not covered under the Policy because (1) the

shortage was disclosed upon taking inventory, (2) the shortage disclosed by the inventory was the

Case 2:05-cv-04776-LDD Document 15 Filed 05/31/06 Page 5 of 10
6

only evidence of loss and (3) there is no physical evidence to show what happened to the

property. Def’s Memo. at 3-13. Plaintiff claims that the shortage was not discovered during the

taking of an inventory, but rather when Andrew Ruszkay, Sr. went to prepare the mechanical

housings for inspection by a potential buyer. Pl’s Memo. at 2-5. In the alternative, plaintiff

argues that even if the shortage was disclosed on taking inventory, the shortage is not the only

evidence of loss and the physical evidence supports the idea of a theft. Id. at 5-7. 

A. Shortage Disclosed on Taking Inventory

Missing property “where the only evidence of the loss or damage is a shortage disclosed

on taking inventory” is not covered under the Policy. Since the language of the contract is clear

and unambiguous, it must be given its plain and ordinary meaning. See Better Environment, Inc.

v. ITT Hartford Insurance Group, 96 F. Supp. 2d 162, 168 (N.D.N.Y. 2000) (finding an identical

provision to be unambiguous). Inventory is “an itemized list of current assets.” MerriamWebster’s Collegiate Dictionary 658 (11th ed. 2003); see also Blacks Law Dictionary 830 (7th

ed. 1999) (defining inventory as “a detailed list of assets”). “Taking inventory” means making an

itemized list of assets. The issue, therefore, is whether the shortage of mechanical housings was

discovered when plaintiff was making an itemized or detailed list of assets.

The parties agree that Barnes wanted to know how many mechanical housings ACR had

in its possession, including the number of mechanical housings which had not undergone any

machining process, and that Andrew Ruszkay, Sr. went to the area where the mechanical

housings were stored because Barnes had inquired about purchasing the items. See Def’s Facts ¶¶

30, 31; Pl’s Facts ¶¶ 30, 31. In his deposition, Andrew Ruszkay, Sr., a Hungarian immigrant,

stated that he “went out there and [Barnes] want[ed] to know how many we have left not touched

Case 2:05-cv-04776-LDD Document 15 Filed 05/31/06 Page 6 of 10
7

yet. Then I went out and counting. And I just - I couldn’t believe it.” Andrew Ruszkay, Sr. Depo.

(“A.R. Depo.”) at 36. He “went in there to count how many pieces and what stage they are, how

much machine.” Id. at 41. He picked up each box and looked to see whether the mechanical

housing was inside. Id. at 42. Andrew Ruszkay, Sr. testified that he was panicking at this point,

and, as a result, he did not take any notes on the number of pieces that had not been machined

until later. Id. He believes he made the list of the remaining items the following day. Id.;

see Def’s Memo., Ex. I. 

In his deposition, Andrew C. Ruszkay, Jr. testified that the shortage was discovered when

“[his] father went out to the shop to look at the castings.” Andrew C. Ruszkay, Jr. Depo.

(“A.C.R. Depo.”) at 47. He testified that his father, after finding empty boxes, asked him if he

had moved any of the mechanical housings, and he responded that “they [were] where they put

them.” Id. at 48. He and his father looked around the shop and questioned Ms. Schroder and Mr.

Follett to see if anybody had moved the items. Id. at 48-49. Andrew C. Ruszkay, Jr. told Chris

Jackson in a recorded interview dated April 6, 2005 that his father “went to go look at the

castings and notice[d] that they were, couldn’t find them, ya know, didn’t seem like they were all

there.” Def’s Memo, Ex. J at 2. 

Plaintiff argues that Andrew Ruszkay, Sr. “went to the area where the missing items were

stored in an attempt to get them ready for an inspection by a potential buyer,” not to take

inventory. Pl’s Memo. at 2. However, even making all reasonable inferences in favor of plaintiff,

the deposition testimony reveals that Andrew Ruszkay, Sr. went to the area where the mechanical

housings were stored to count the number of mechanical housings and to determine the stage of

machining for each piece – in other words, to take an inventory of the mechanical housings. 

Case 2:05-cv-04776-LDD Document 15 Filed 05/31/06 Page 7 of 10
8

Even though it may have been almost immediately apparent to Andrew Ruszkay, Sr. that

mechanical housings were missing, it does not negate the fact that the shortage was disclosed on

taking inventory. 

B. Only Evidence of Loss 

In order for the limitation to apply, the only evidence of loss must be a shortage disclosed

on taking inventory. See Policy, Causes of Loss - Special Form at 5. Plaintiff argues that the

shortage disclosed on taking inventory is not the only evidence of loss. Pl’s Memo. at 5-7. 

Specifically, plaintiff claims that boxes which had previously contained mechanical housings

were empty, that the alleged thieves had removed the castings and restacked the boxes to cover

up the disappearance, and that the thieves only took the mechanical housings from the inside of

the stacked pallets so that it was difficult to detect the loss. Id. at 6-7. Defendant argues that

ACR has no evidence as to how or when the mechanical housings became missing and no

evidence that an employee or any other person stole the mechanical housings from ACR. Def’s

Memo. at 4-5. Based on the plain and ordinary meaning of the contract, the issue is whether

there is evidence of loss other than the shortage disclosed on taking inventory.

Andrew Ruszkay, Sr. testified that he found “empty boxes where piece is supposed to be

there.” A.R. Depo. at 45. Similarly, Andrew C. Ruszkay, Jr. testified that some of the boxes did

not contain castings when he examined the boxes on March 30, 2005. A.C.R. Depo. at 71-72. 

He also testified that the boxes were stacked on the skids in such a way that the skids appeared

full even though boxes were missing. Id. at 59, 72-73. The rearrangement of the stacked pallets

to make the loss difficult to detect is evidence of concealment, not evidence of loss. However,

Case 2:05-cv-04776-LDD Document 15 Filed 05/31/06 Page 8 of 10
 Defendant does not contend that there were not empty boxes. 6

9

the empty boxes, if the testimony is believed by the trier of fact, are evidence of loss. Making 6

all reasonable inferences in favor of plaintiff, there is evidence of loss in addition to the shortage

disclosed on taking inventory. Therefore, the first part of the limitation clause does not apply.

C. Other Instances Where There is No Physical Evidence

The limitation at issue provides that there is no coverage for loss or damage to “[p]roperty

that is missing, where the only evidence of the loss or damage is a shortage disclosed on taking

inventory, or other instances where there is no physical evidence to show what happened to the

property.” See Policy, Causes of Loss - Special Form at 5. Since this Court has determined that a

reasonable trier of fact could find that there was evidence of loss in addition to the shortage

disclosed on taking inventory, this Court must now examine the second part of the limitation. If

this is an instance where “there is no physical evidence to show what happened to the property,”

then the loss will not be covered under the Policy. 

When asked what physical evidence existed to show what happened to the property,

Andrew C. Ruszkay, Jr. responded, 

Empty boxes that were – had pieces in them. How the pieces were stored on the

skid in one of the sites. They had piled like three high, and they took out the skids

that were in the middle and in the back, and left the ones in the front and the front

corners, and then like the back right corner there, and took out the rest of the

pieces. So if you were to walk to past it you would still see the stacked machine

pieces appearing to be fully filled up on each skid, when they might only have

three pieces on a skid or enough to just balance it there. 

A.C.R. Depo. at 59. The Coatesville Police Report filed on March 30, 2005, the day the shortage

was discovered, notes that, according to Andrew C. Ruszkay, Jr., the “actor had removed the

pieces from inside of the stack. This gave the appearance that the pallets were still stacked.”

Case 2:05-cv-04776-LDD Document 15 Filed 05/31/06 Page 9 of 10
 Defendant argues that there was no evidence of forced entry or burglary, no evidence of 7

tampering with the boxes, and no evidence regarding when the mechanical housings were

allegedly stolen. Def’s Memo. at 13. While this is true, the Policy does not require any specific

evidence; it only requires “physical evidence to show what happened to the property.” 

10

Def’s Memo., Ex. K. The rearrangement of boxes on the pallets in order to disguise the loss is

physical evidence that shows what happened to the property, i.e. that it was stolen.7

There is some conflicting testimony regarding whether the boxes had been rearranged on

the pallets to disguise the loss. When Andrew Ruszkay, Sr. was asked if there was any evidence

that someone tried to move the boxes to hide the fact that certain of the mechanical housings

were missing, he said no. A.R. Depo. at 47-48. A reasonable trier of fact could find that the

boxes were rearranged in order to hide the loss; however, a reasonable trier of fact could also

determine that the boxes had not been moved to disguise the loss. Given the conflicting

testimony, this Court finds that a material issue of fact exists. As a result, the Court is unable to

determine whether the second part of the limitation applies. 

IV. CONCLUSION

Accordingly, defendant’s motion for summary judgment is denied. An appropriate order

follows. 

Case 2:05-cv-04776-LDD Document 15 Filed 05/31/06 Page 10 of 10